Oversight board forces a $19 million budget on East St. Louis, Ill.

CHICAGO - The financial oversight authority for East St. Louis, Ill., late Tuesday imposed a $19.3 million fiscal 1993 budget on the beleaguered city because city officials failed to submit its budget in a timely manner.

The five-member East St. Louis Financial Advisory Authority also voted to issue a request for proposals for an accounting firm to take over the city's financial matters, citing the city's failure to adequately manage its finances, according to Earl Lazerson, the authority's chairman.

"They simply failed to perform." Lazerson said.

The city has until Dec. 30 to implement the budget or the authority can intercept state proceeds, including income and sales taxes, to pay off $3.7 million the state lent the city last year.

The oversight board, established by state law two and a half years ago, must approve or reject all the city's budgets, financial plans, and contracts.

Two weeks ago, the authority granted the city a final deadline of Tuesday to submit its 1993 budget before having one imposed. The city had previously missed submission deadlines of Nov. 1 and 15.

Ronald Bean, a member of the authority, said city officials presented the oversight board with a fiscal 1993 budget just two hours before the authority's meeting on Tuesday. East St. Louis' fiscal year begins Jan. 1.

However, authority officials said they did not consider the city's budget for approval because it was presented so late.

"We ignored the [city's] budget because the city was untimely and unresponsive," Bean said.

Lazerson said the authority decided to implement its own budget for the city because a complete review of the city's budget could take two to three weeks. Waiting for completion of the review could have jeopardized vital services to the city's 45,000 residents if the budget was not approved by Jan. 1, Lazerson said.

Frank Childress, chief adviser for Mayer Gordon Bush, said the mayor had "some concerns" about the authority's action. Childress declined to speak on behalf of the mayor, who could not be reached for comment.

Other city officials did not return repeated phone calls.

Bean said the authority will immediately issue a request for proposals for an accounting firm to handle the city's finances, adding that one could be selected by January or February.

He said the accounting firm will work with city finance officials to help the city adequately manage its finances. If the city does not make significant improvements in its records and reports, the authority could intercept up to $5 million of state proceeds to pay off the $3.75 million loan.

The financial oversight board was authorized by the Financially Distressed Cities Act, which was passed by the Illinois General Assembly in 1990. The law set up a general framework for rescuing troubled cities, but was drafted specifically with East St. Louis in mind.

At that point, the city no longer had money to fix broken police and fire vehicles or pay for garbage collection.

According to the law, the authority will be dissolved only if the city prepares and operates under balanced budgets and meets other specified conditions for 10 years.

The city and financial advisory authority are working on a long-term plan that would involve restructuring the city's estimated $30 million to $40 million of outstanding debt, according to Bean. The plan could be completed by mid-1993, added Bean, who also serves as the executive director of the Illinois Development Finance Authority.

Once the plan is completed, advisory board officials say they would turn to the state finance authority for assistance. The finance authority would be asked to issue $30 million of bonds and lend the proceeds to the city to assist paying off its long-term debt, as authorized by the Financially Distressed Cities Act.

In case the city failed to make debt service payments, the financial advisory authority would have the power to intercept the city's annual share of state income and sales tax revenues. As added security, the bonds would carry the moral obligation pledge of the state.

For three decades, East St. Louts has been experiencing an economic and population decline that has left its residents - two-thirds of whom are on welfare - with minimal services and the state's highest taxes.

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